Jim Cramer recommends owning homebuilder stocks: here’s why

“DJSHMB” – the Dow Jones U.S. Select Home Construction Index is already up more than 30% versus its June low. Still, Jim Cramer says the homebuilder stocks are not out of juice just yet.

Technicals suggest more upside ahead

The U.S. central bank is currently signalling a terminal rate of 5.1% this year. Simply put, it’s expected to raise rates further in the coming months.

Typically, that would mean bad news for the construction space. But “technicals”, as per the famed investor, are telling a different story.

Chart is screaming that it’s not too late to buy homebuilders. We’re looking at a classic reversal pattern, an inverse head and shoulders pattern. The group has broken out to a new high. The chart says something good is happening here.

His remarks were based on data from market technician Dan Fitzpatrick.

Cramer reveals top homebuilder stock to own

In December, the monthly new home sales were reported to have climbed to 640,000 – way more than 600,000 that experts had forecast.

Within the homebuilder stocks, a name that particularly pops out to Cramer is Lennar Corp (NYSE: LEN) that’s already gained about 35% over the past three months. On Mad Money, he said:

Fitzpatrick wants to pick the strongest of the bunch. That’s Lennar, which has the advantage of being among the best front players in the industry. It’s outperforming 91% of the market. It’s a clear winner in a lousy environment.

Last month, Lennar Corp reported better-than-expected per-share profit for its fourth financial quarter. Wall Street also has a consensus overweight rating on “LEN”.

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